FTB-C000681 / Algorithm

Head and Shoulders

Head and Shoulders is a bearish reversal detector with comparable outer highs, a higher middle head, two troughs, and a causal neckline break.

Also known asH&S

Intermediate Formula defined 1 linked topicEvidence-reviewed

Definitions

In plain terms

It differs from a triple top because the middle high must dominate rather than merely match the shoulders.

Technical

The selected five-pivot sequence is high-low-high-low-high; outer shoulders satisfy similarity, head dominance >= 0.05, retracements and prior rise pass, then close crosses below the projected trough neckline.

Scope

Head and shoulders is a detector contract, not a guaranteed reversal or performance claim.

Formula

comparable outer highs, dominant middle head, two trough anchors, and strict downside break
LaTeX: H-L-H-L-H,\quad d=\frac{h-\bar p}{\bar p}\ge0.05,\quad C_t<N_t
SymbolMeaningUnit
hhead highprice
N_tprojected necklineprice

Output unit: pattern state

Examples

  • A reviewer computes Head and Shoulders on a deterministic close fixture and checks pivot timing, threshold equality, neckline behavior, and rejection diagnostics before publication.

Common misconceptions

  • Head and shoulders is a detector contract, not a guaranteed reversal or performance claim.

Concept relationships

Prerequisites

Related

Required by

Where this concept is used

Evidence and governance

  1. Head and Shoulders: Not Just a Flaky Pattern Federal Reserve Bank of New York · official standard

    Supports: preferred label, short definition, technical definition, formula

    Limits: Its historical sample and performance results are not transferred to this detector or current markets.

  2. Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation Lo, Mamaysky, and Wang · first party technical publication

    Supports: preferred label, short definition, technical definition, formula

    Limits: The paper's smoothing, sample, and empirical design are not copied into this package and do not validate its thresholds.

  3. Pine Script repainting concepts TradingView · official platform documentation

    Supports: preferred label, short definition, technical definition, formula

    Limits: Platform display behavior does not establish financial usefulness or predictive value.

  4. scipy.signal.find_peaks SciPy · first party technical publication

    Supports: preferred label, short definition, technical definition, formula

    Limits: This retrospective signal function is not itself a causal OHLC pivot detector.

  5. Pine Script pivot techniques TradingView · official platform documentation

    Supports: preferred label, short definition, technical definition, formula

    Limits: The package freezes its own equality, separation, and OHLC policies rather than claiming one universal pivot definition.

Reviewed by
fintech-builder-batch-012
Last reviewed
2026-08-10
Next review
2027-08-10
Record status
evidence reviewed

This record is evidence-reviewed and readable, but not yet promoted to published — it is served noindex,follow and excluded from the sitemap.

Written by

Fintech engineer building market-data and financial systems, and the author of every article, glossary record, and reference implementation on The Fintech Builder.